SQI Diagnostics Reports Second Quarter 2020 Results

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TORONTO, May 28, 2020 /CNW/ - SQI Diagnostics Inc. ("SQI" or the "Company") SQDSQIDF, today reported its financial and operational results for the three and six months ended March 31, 2020.

SQI is a Toronto-based life sciences and diagnostics company that develops and commercializes proprietary technologies and products for advanced multiplexed diagnostics.

Highlights for the Quarter

  • University Health Network ("UHN) validated TORdx LUNG assay in the operating room at the Toronto General Hospital.
  • Canadian Institutes of Health Research ("CIHR") grant leads to initiation of various COVID-19 and respiratory infection studies with UHN utilizing RALI-Dx and RALI-fast products.
  • SQI received New York State Department of Health ("NYSDOH") approval of rheumatoid arthritis direct-to-consumer ("DTC") test.

Said Eric Brouwer, Interim Chief Executive Officer: "SQI had a number of positive developments during the quarter. The global pandemic underscores our strategy of focusing on lung and more broadly organ health. Our agility allowed us to quickly pivot by leveraging our existing lung transplant product to develop a COVID-19 triage test. Clinical studies in support of regulatory approvals began in April 2020 and subject enrolment is 50% complete. If successful, we anticipate the launch of two products that would not only provide financial benefits to the Company but would be critical life-saving technologies." Continued Brouwer, "We also received approval for our rheumatoid arthritis direct-to-consumer test which allowed our customer Microdrop to begin selling the test to consumers in all 50 U.S. states, with testing  being allowed to commence at SQI's CLIA lab partner, Trinity Biotech, in Buffalo, New York."  

Q2 2020 and year-to-date Financial Results Overview

For the quarter ended March 31, 2020, the Company recorded a net loss of $2,269,000 ($0.01 net loss per share) as compared to the net loss of $1,568,000 ($0.01 net loss per share) for the same period last year. For the six-months ended March 31, 2020, the Company recorded a net loss of $4,283,000 ($0.02 net loss per share) as compared to the net loss of $3,326,000 ($0.02 net loss per share) for the same period last year. The net losses in the current periods are higher than the net losses in the corresponding prior year periods primarily due to lower revenue and higher expenses in the Research & Development ("R&D") area. Per share values are based on the weighted average shares outstanding in the relevant period. For the quarter and six-months ended March 31, 2020, there was an average of 252,040,000 and 242,022,000 shares outstanding, respectively.

Total revenues for the quarter ended March 31, 2020 were $269,000 compared to $419,000 for the same period last year. Total revenues for the six months ended March 31, 2020 were $476,000 compared to $711,000 for the same period last year. Product revenue, which includes revenue from kit sales was $115,000 for the current quarter compared to $287,000 for the same period last year. Product revenue was $262,000 for the six-months ended March 31, 2020 compared to $533,000 for the same period last year. The decrease in product revenue is due to the loss of one customer, which accounted for a material percentage of revenue in the same prior year period.  Revenue from services in the second quarter was $154,000 compared to $132,000 in the same period last year. Revenue from services for the six-months ended March 31, 2020 was $214,000 compared to $178,000 in the same period last year. Service revenues were higher in the second quarter of 2020 compared to the same prior year period due to recognition of the remaining portion of a large contract to develop multiple lung transplant products that are now transitioning to commercial sales.

Research and development expenditures, excluding amortization and stock-based compensation, for the three months ended March 31, 2020 were $1,196,000 compared to $695,000 for the same period last year. Research and development expenditures, excluding amortization and stock-based compensation, for the six-months ended March 31, 2020 were $2,202,000 compared to $1,572,000 for the same period last year. Expenses were higher due to several factors; the absence of a SRED tax credit in the current period that was included in the last fiscal year's comparative period, higher salaries and wages, and higher laboratory costs and supplies. Laboratory costs and supplies increased during the quarter and six months ended March 31, 2020, when compared with the corresponding quarter prior year as one of our main research and development projects with the UHN is currently in full design phase while it was had just been initiated last year.

Corporate and general expenses, excluding stock-based compensation, totaled $443,000 for the three-months ended March 31, 2020 as compared to $366,000 for the same period last year. Corporate and general expenses, excluding stock-based compensation, totaled $807,000 for the six-months ended March 31, 2020 as compared to $690,000 for the same period last year due to higher professional fees. Professional fees include legal, investor relations and consulting fees. Professional fees were higher in the current quarter compared to the same period last year due to higher recruiting costs and legal fees.

Sales and marketing expenses, excluding stock-based compensation, increased to $385,000 for the three-months ended March 31, 2020 compared to $323,000 for the same period last year. Sales and marketing expenses, excluding stock-based compensation, were essentially flat at $644,000 for the six-months ended March 31, 2020 compared to $648,000 for the same period last year.

Non-cash, stock-based compensation charges decreased to $108,000 for the three-months ended March 31, 2020 compared to $169,000 for the same period last year. Non-cash, stock-based compensation charges decreased to $235,000 for the six months ended March 31, 2020 compared to $299,000 for the same period last year. The reduction is a result of forfeitures of stock options associated with the departure of certain employees.

At March 31, 2020, current assets were $3,636,000 including $2,551,000 of cash compared to $4,494,000 including $3,444,000 of cash at September 30, 2019. As at March 31, 2020, the Company had a $2,252,000 working capital surplus compared to a working capital deficit of $217,000 at September 30, 2019. The higher surplus is due to a change in the classification of debentures which matured in the quarter and were subsequently extended; this extension changed the classification from a current liability to a long-term liability in the period.

Detailed financial statements and the management's discussion and analysis (MD&A) will also be made available on the Company website at www.sqidiagnostics.com and at www.sedar.com

Financial and Business Highlights for the Quarter and Year to Date:

Corporate Financing Transactions:

Private Placements

On September 25, 2019 and October 22, 2019, the Company completed a non-brokered private placement of an aggregate of 32,300,000 units of the Company at $0.10 per unit for gross proceeds of $3,230,000. Each unit comprises one common share of the Company and one common share purchase warrant. Each warrant is exercisable at a price of $0.13 and entitles the holder thereof to acquire one common share for a period of five years from the date of issuance.

On February 14 and March 5, 2020, the Company completed a non-brokered private placement of an aggregate of 44,444,444 units of the Company at $0.09 per unit for gross proceeds of $4,000,000.  Each unit comprises one common share of the Company and one common share purchase warrant.  Each warrant is exercisable at a price of $0.12 and entitles the holder thereof to acquire one common share for a period of five years from the date of issuance, subject to accelerated expiry in certain circumstances.

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The Company used a portion of the net proceeds of the Private Placement completed in the quarter to repay $1,000,000 of the principal amount of certain 10% secured non-convertible debentures of the Company, plus accrued interest of $100,000. The remaining funds are expected to be used for the Company's product commercialization and manufacturing programs, sales and marketing and for general working capital purposes.

Debenture Extension

On January 30, 2015 and February 20, 2015, the Company issued secured debentures (the "Debentures") with principal amounts of $1,950,000 and $1,286,000, respectively. The Debentures bore interest at a rate of 10% and were redeemable 60 months from the date of issuance. The Debentures matured during the quarter ended March 31, 2020 with $1,000,000 of the February tranche and $100,000 of accrued interest related to this amount being repaid by the Company. The maturity dates of the existing $2,236,000 Debentures were extended for an additional five years in agreement with the holders of these financial instruments. In addition, $223,600 of accrued interest was added to the principal amount of the existing debentures resulting in new principal amounts of $2,145,000 and $314,600 as of January 30, 2020 and February 20, 2020, respectively.

For more information, please contact:

Interim Chief Executive Officer
Eric Brouwer
416.674.9500 ext. 242
ebrouwer@sqidiagnostics.com

Chief Financial Officer
Morlan Reddock
416.674.9500 ext. 277
mreddock@sqidiagnostics.com

About SQI Diagnostics
SQI Diagnostics is a life sciences and diagnostics company that develops clinical-grade multiplexed microarray and molecular assays run on its automated instrumentation for the pharmaceutical research, animal health, and clinical diagnostics markets. SQI develops custom research and diagnostic assays that are "multiplexed"; which means many individual tests can now be simplified, consolidated and automated into a single test. This significantly increases sample throughput, reduces time, cost and chance for human error, and provides excellent data quality. For more information, please visit sqidiagnostics.com.

Forward-looking Statements
This press release contains certain statements including, without limitation, the words "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect", "believe", "in the process", "benefits", "leading to", "position" "possible", "is subject to" and other similar expressions which may constitute "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements reflect the Company's current expectations and assumptions, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to: our ability to market and sell our products including our novel multiplexing technologies and detection platforms; our ability to maintain any technical or product advantages; the success of our Diagnostic Tools and Services business and our intent to build near-term revenue streams from this business; the successful regulatory filing and receipt of regulatory approvals for our later stage quantitative diagnostic consumable kits; adverse changes in general economic conditions; international risk and currency exchange fluctuations; competitor activity; technology changes; regulatory approvals and the impact of healthcare reform legislation; and, SQI's ability to raise additional funds in the future.

Such statements, risks and uncertainties are detailed in the Company's ongoing filings with the securities regulatory authorities, and are available to the public at www.sedar.com. The Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise, except as required by applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE SQI Diagnostics Inc.

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